By Leo Arzumanyan
Global Legal Law Firm
In a landmark case that has spanned nearly two decades, the proposed $30 billion settlement between Visa Inc., Mastercard Inc. and retailers aimed at capping credit-card swipe fees has been rejected.
According to a recent Minute Entry from the Court Docket in In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation (1:05-md-01720), a federal judge in Brooklyn indicated on June 13, 2024, that the court would likely not approve the settlement.
Specifically, the Minute Entry states, "The Court will issue a written decision, but informed the parties that it will likely not approve the Settlement." This development represents a significant setback in the prolonged litigation battle over interchange fees, which has profound implications for the electronic payments industry and its various stakeholders, including merchants, payment processors and issuing banks.
On June 25, the proposed settlement was scuttled by Chief Judge Margo K. Brodie of the U.S. District Court for the Eastern District of New York.
The proposed settlement, announced on March 26, 2024, was designed to address numerous claims in a nationwide litigation effort spearheaded by retailers. These merchants have long contended that Visa and Mastercard impose exorbitant swipe fees, known in the industry as interchange fees, for processing credit and debit card payments.
These fees, which totaled $172 billion in 2023 according to the Merchants Payments Coalition, have more than doubled over the past decade. The coalition represents a broad array of retailers, grocers, convenience stores and gas stations, all of whom bear the brunt of these escalating costs.
The primary contention from retailers is that these fees, which range from 1.5 percent to 3.5 percent per transaction, significantly inflate their operating expenses. Interchange fee revenue, not including other fees tacked on by processors, is funneled to the banks that issue the cards. Moreover, merchants argue that Visa and Mastercard have unlawfully prevented them from steering customers toward cheaper payment alternatives.
The March 26 settlement aimed to provide some relief to merchants by allowing them to charge consumers extra for transactions involving Visa or Mastercard credit cards. This move would enable businesses to employ pricing tactics that encourage the use of lower-cost cards. The agreement included more than 90 percent of the settling merchants, predominantly small businesses, highlighting the widespread impact of the proposed terms.
Additionally, the settlement proposed a reduction in the average interchange fee by at least 0.04 percentage points for three years. It also included provisions to cap rates for five years and eliminate anti-steering rules that currently restrict merchants from guiding consumers toward less expensive payment methods.
The settlement's rejection represents a major setback for retailers who have tirelessly fought to reduce interchange fees. The ongoing litigation has kept the spotlight on the contentious relationship between merchants and the major credit card networks.
The rejection likely means prolonged legal battles and continued financial strain for businesses that already grapple with high processing costs, including the following:
The rejection of the $30 billion settlement between Visa, Mastercard and retailers underscores the complexity and contentiousness of interchange fee litigation. As the electronic payments industry continues to evolve, stakeholders must navigate a landscape fraught with legal, financial and operational challenges.
The ongoing struggle between merchants seeking relief from high interchange fees and credit card networks aiming to protect their revenue streams will shape the future of payment processing and consumer transactions for years to come.
Note: This article is for informational purposes only and does not constitute legal advice. Readers are encouraged to seek professional legal counsel regarding their specific circumstances by contacting an attorney at Global Legal Law Firm. 
An alumnus of the University of San Diego, School of Law, Arzumanyan has a proven track record of drafting, reviewing, revising and negotiating an extensive array of commercial contracts, including vendor, nondisclosure, employment, software-as-a-service, consulting and marketing agreements. Leveraging his prior in-house counsel background, Arzumanyan has also carved out a unique niche within the electronic payments industry as his transactional expertise now encompasses merchant processing, merchant banking and sponsorship, referral, independent sales office, and other related agency agreements. Contact him at larzumanyan@glrlegal.com.
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